You never know what life is going to throw your way, but you can be prepared for most situations that arise by maintaining a well-stocked emergency fund. Many financial planners will advise that you have at least six months’ worth of expenses in your savings. This will cover you in the event of a job loss, injury, or other personal catastrophes. Here are some of the benefits of having a well-stocked emergency fund.
You Can Avoid Debt in an Emergency Situation
Sometimes an emergency can push you into debt, somewhere that nobody wants to be. For example, if you were to slip on ice and break your arm, you would likely be on the hook for some hospital bills, even with health insurance. If you have a well-stocked emergency fund, you are able to pay off these hospital bills right away and avoid going into debt and hurting your credit score.
Another example of avoiding debt is if you lose your job and cannot pay your bills. Some of them you may be tempted to put on your credit card, which is essentially debt. If you have an emergency fund, you could simply cover these bills until you find a new job and avoid going into debt.
You Can Save Yourself from Money-Related Stress
I think we can all agree that stress is really bad for your health, both mental and physical. Financial stress can be extremely taxing and hard on your body and mind. By having an emergency fund, you can save yourself from a lot of stress.
Creating an Emergency Fund can be Easier than You Think
The good news for those that don’t have an emergency fund is this: creating and maintaining an emergency fund is much easier than you may think at first. If you are setting up an emergency fund for the first time, the easiest way to do so is by setting aside a small amount from each paycheck. Your job’s HR department may even give you the option to split your direct deposit to go into two different accounts. If this is not an option, your bank may also let you set up auto-transfers to your savings account. By saving this way, you will not even notice that the money has been set aside, making it so much easier to save.
While everyone will need to have a different amount in their emergency fund, a good general rule is to have six months of expenses saved for emergencies. The bottom line is that maintaining an emergency fund is one of the smartest financial decisions you can make, and it will give you valuable peace of mind.
